Finance Masters (Part I)
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Transcript of Finance Masters (Part I)
Finance Masters: A Brief History of InternationalFinancial Centers
October 2016London WFC (Part I)
Finance Masters is a brief history of International FinancialCenters since their emergence 1,000 years ago
« Finance Masters is an amazing journey in time tobetter understand modern finance »
« For many readers, the most fascinating part will be thelast section, the book provides important insights
into the Great Recession »
« This is also a major contribution on finance ethics »Pr. Seamus Grimes, Emeritus Professor, Whitaker Institute, NUI Galway
« Finance Masters is an amazing journey in time tobetter understand modern finance »
« For many readers, the most fascinating part will be thelast section, the book provides important insights
into the Great Recession »
« This is also a major contribution on finance ethics »Pr. Seamus Grimes, Emeritus Professor, Whitaker Institute, NUI Galway
This presentation (Part I) is a short overview of thefirst half of Finance Masters which has been
released in October 2016 in Singapore
Page 2
After the early fairs of St Giles, the French fairs ofChampaign became the first finance hub of the Middle Ages
Comments :• In the 11th century, the fair of St. Giles
(England) became the largest in Europe
• It fostered both a large trading andinternational financial business
• As such, it is known as the ancestor ofInternational Financial Centers (IFCs)
• Then the fairs of Champaign (France)became its most illustrious successor
• In the 12th century, those fairs attractedmerchants all over Europe and became themain mart for international trade
Comments :• In the 11th century, the fair of St. Giles
(England) became the largest in Europe
• It fostered both a large trading andinternational financial business
• As such, it is known as the ancestor ofInternational Financial Centers (IFCs)
• Then the fairs of Champaign (France)became its most illustrious successor
• In the 12th century, those fairs attractedmerchants all over Europe and became themain mart for international trade
Page 3
Source: Résumé de l’histoire de Champagne (19th century)
Medieval Florentine and Jewish money changers attendinglarge fairs laid the foundation of modern finance
“On one side the peasantry living almost secluded in their village, [ … ], on theother side an emerging market economy inventing our modern economy”
Fernand BraudelThe Dynamic of Capitalism Page 4
Florence financiers acted all over Europe as a ferment of theCommercial Revolution
Comments :• The end of the 11th century brought a slight
resurgence of business in Italian cities
• Florence managed to assert its mastery offinancial techniques related to trade
• The Florin, a new gold coin minted in1252 brought an immense prestige
• Florentine money changers could beseen on the fairs all over Europe
• Beside politics the Medici family wasdeeply involved in trading and usury
• Florence never became a financial hub sinceit was more busy with arts and politics
Comments :• The end of the 11th century brought a slight
resurgence of business in Italian cities
• Florence managed to assert its mastery offinancial techniques related to trade
• The Florin, a new gold coin minted in1252 brought an immense prestige
• Florentine money changers could beseen on the fairs all over Europe
• Beside politics the Medici family wasdeeply involved in trading and usury
• Florence never became a financial hub sinceit was more busy with arts and politicsSource: Florence in a 1493 woodcut from Hartmann Schedel's
Nuremberg Chronicle
Page 5
The Church was actively involved in temporal matters andprohibited lending money with an interest as usury
“Although lending money with an interest was generally prohibited as usurious theconversion of debt in various currencies managed to create significant profits for both
lenders and money changers ”Finance Masters Page 6
In the 10-11th century, Venice became the first realinternational financial centre (IFC) from a modern perspective
“The Ducat was named after the Doge of Venice, the “louis d’or” after king Louis ofFrance” both were instruments of sovereignty
Charles P. KindlebergerA financial history of Western Europe
Page 7
Source: Giovani Bellini (National Gallery)
The Lagoon City established a trading dominance on seaand in mastering the most advanced financial instruments
“Venice as a state city was not only in a capacity to trade but also to make war as needed”Finance Masters
Page 8
Source: Tintoretto, Vienna, Kunsthistorisches Museum Source: Hulton Archives
In 1405, about 6,200 nautical miles from Venice, an army ofshipbuilders was preparing China for its greatest sea adventure
Comments :• The Great Ming armada was preparing
for its seven diplomatic journeys underthe command of admiral Zheng He
• He visited 37 countries through SEA toAfrica and Arabia
• The Great Fleet included 28,000 menon 317 ships
• In spite of the Zheng He and MarcoPolo travels, both Western and Easternworlds would never trade directly
• But neither the feared galley fleet ofVenice nor the “Great Fleet” ever met
Comments :• The Great Ming armada was preparing
for its seven diplomatic journeys underthe command of admiral Zheng He
• He visited 37 countries through SEA toAfrica and Arabia
• The Great Fleet included 28,000 menon 317 ships
• In spite of the Zheng He and MarcoPolo travels, both Western and Easternworlds would never trade directly
• But neither the feared galley fleet ofVenice nor the “Great Fleet” ever met
Source: Zheng He statue in Fuzhou (PRC)
Page 9
From 1500 to 1550, the loss of Venice domination turned thewheel, Antwerp emerged as a world class finance centre
Comments :• A dynamic financial Sephardic Jewish
community settled in Antwerp
• The Antwerp city opened a bourse in1515
• Portuguese merchants were activein the port trading the New World gold
• In 1590s, the Antwerp money marketcollapsed
• For almost 100 years, Antwerp hadremained the commercial capital ofNorthern Europe
Comments :• A dynamic financial Sephardic Jewish
community settled in Antwerp
• The Antwerp city opened a bourse in1515
• Portuguese merchants were activein the port trading the New World gold
• In 1590s, the Antwerp money marketcollapsed
• For almost 100 years, Antwerp hadremained the commercial capital ofNorthern Europe
Source: Old map of Antwerp, Antwerp library
Page 10
Genoa, Venice arch-rival, was just waiting for its time in the16th to become a successor world financial center to Antwerp
“On par with the Florence bankers in the 13th century, the bankers from thePiazza De Ferrari were seen as the few people capable of mastering the best
finance techniques”Finance Masters
Page 11
Genoa was supported by the Spanish Empire as its financial armto recycle the inflows from the New World, skipping Flanders
Comments :• The genius of the Genoese finance was
to use silver inflows from the NewWorld to create a powerhouse
• The bank of Saint George was acting both asa trading and reserve bank
• Genoese merchant bankers masteredsecured international money transfers
• Andrea Doria made the city state a satellite ofthe Spanish empire and ended family feuds
• The suspension of Genoese funding to Spaindue to war was the signal of the city decline
Comments :• The genius of the Genoese finance was
to use silver inflows from the NewWorld to create a powerhouse
• The bank of Saint George was acting both asa trading and reserve bank
• Genoese merchant bankers masteredsecured international money transfers
• Andrea Doria made the city state a satellite ofthe Spanish empire and ended family feuds
• The suspension of Genoese funding to Spaindue to war was the signal of the city decline
Source: Bank of Saint George, Genoa
Page 12
“The Genoese system of international finance stands alone in history up until the present day as anexemple of an International Financial Center”
David ScholeyCEO, S.G. Warburg
In 1588, the defeat of the Invincible Armada paved the wayfor the English – Dutch dominance on international trade
Comments :• After the Spanish conquered Antwerp
many Jewish merchants fled toAmsterdam
• They established a strong businesscommunity and opened new routes (India)
• The Dutch East India Company (VOC)was created in 1602
• The powerful bank of Amsterdambegan operations in 1609
• In 1610, the Amsterdam patriciansapproved the plan of the 3 canalsto further extend the city
Comments :• After the Spanish conquered Antwerp
many Jewish merchants fled toAmsterdam
• They established a strong businesscommunity and opened new routes (India)
• The Dutch East India Company (VOC)was created in 1602
• The powerful bank of Amsterdambegan operations in 1609
• In 1610, the Amsterdam patriciansapproved the plan of the 3 canalsto further extend the city
Source: National Maritime Museum, Greenwich
Page 13
As early as the 17th century, a large option market hademerged in Amsterdam now the leading financial center
Comments :• A first large scale bubble originated
from the 1636-37 Tulip mania
• The forward and option market provided allthe necessary background
• The highest bid reached 20 times theannual income of an honest craftsman
• In Haarlem, during a routine auction,the highest bidder ran triggering panic
• Despite the scandal, this was of negligibleconsequence on the real economy andtenure of Amsterdam as an IFC
Comments :• A first large scale bubble originated
from the 1636-37 Tulip mania
• The forward and option market provided allthe necessary background
• The highest bid reached 20 times theannual income of an honest craftsman
• In Haarlem, during a routine auction,the highest bidder ran triggering panic
• Despite the scandal, this was of negligibleconsequence on the real economy andtenure of Amsterdam as an IFC
Source: Bollettino Telematico dell'Arte, Bibioteca Nazionale Centraledi Roma
Page 14
Bankers started to relocate to London following the degradation ofthe relationships between England and the Dutch Republic
“Gradually, the scale of English navy overtook the Dutch in the first half of the18th century”
Finance MastersPage 15
Source: John Cleveley the Elder, The Royal George at Deptford
To be continued (in Part II) …
“John Law de Lauriston is said to have mentioned to Victor Emmanuel II that hehad discovered the secret to turn paper into gold”
Finance Masters
Page 16
Source: Lorient, Museum of Compagnie des Indes
Author’s Biography - Olivier Coispeau
Resume
• Olivier Coispeau, CFAF
• Co-Founder of Maverlinn Strategic Finance
• Strategy and Finance with leadingconsulting practices and investment banks
• Taught economics at Paris-Sorbonneuniversity
• Frequently invited guest speaker tointernational finance forums
• Education: Stanford University, ParisDauphine University and Sciences Po Paris
Page 17
Resume
• Olivier Coispeau, CFAF
• Co-Founder of Maverlinn Strategic Finance
• Strategy and Finance with leadingconsulting practices and investment banks
• Taught economics at Paris-Sorbonneuniversity
• Frequently invited guest speaker tointernational finance forums
• Education: Stanford University, ParisDauphine University and Sciences Po Paris
Leading a world of change, together